Correlation Between PT Bank and NIKKON HOLDINGS

Can any of the company-specific risk be diversified away by investing in both PT Bank and NIKKON HOLDINGS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PT Bank and NIKKON HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Bank Mandiri and NIKKON HOLDINGS TD, you can compare the effects of market volatilities on PT Bank and NIKKON HOLDINGS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PT Bank with a short position of NIKKON HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and NIKKON HOLDINGS.

Diversification Opportunities for PT Bank and NIKKON HOLDINGS

-0.61

Correlation Coefficient

PT Bank  NIKKON HOLDINGS

Excellent diversification

The 3 months correlation between PQ9 and NIKKON is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and NIKKON HOLDINGS TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKKON HOLDINGS TD and PT Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PT Bank Mandiri are associated (or correlated) with NIKKON HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKON HOLDINGS TD has no effect on the direction of PT Bank i.e., PT Bank and NIKKON HOLDINGS go up and down completely randomly.

Pair Corralation between PT Bank and NIKKON HOLDINGS

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the NIKKON HOLDINGS. In addition to that, PT Bank is 5.17 times more volatile than NIKKON HOLDINGS TD. It trades about -0.03 of its total potential returns per unit of risk. NIKKON HOLDINGS TD is currently generating about -0.12 per unit of volatility. If you would invest  1,260  in NIKKON HOLDINGS TD on October 5, 2024 and sell it today you would lose (30.00) from holding NIKKON HOLDINGS TD or give up 2.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PT Bank Mandiri  vs.  NIKKON HOLDINGS TD

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NIKKON HOLDINGS TD

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days NIKKON HOLDINGS TD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIKKON HOLDINGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and NIKKON HOLDINGS

The main advantage of trading using opposite PT Bank and NIKKON HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, NIKKON HOLDINGS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NIKKON HOLDINGS will offset losses from the drop in NIKKON HOLDINGS's long position.

The idea behind PT Bank Mandiri and NIKKON HOLDINGS TD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.